Question

Which statement is CORRECT? Automatic stabilizers are risky to use and sometimes can get the economy destabilized. Discretionary fiscal policy shows automatic adjustments without any specific effort by policy makers. Discretionary fiscal policy indicates deliberate action by policy makers. Automatic stabilizers indicate deliberate action by policy makers.

Answer 1

Answer:

Discretionary fiscal policy indicates deliberate action by policy makers.

Explanation:

Automatic stabilizers are stabilizers that adjust the economy automatically without the intervention of external agents . examples include progressive tax and transfer payments

In an expansion, progressive tax increases the tax paid and this reduces disposable income

In a contraction, tax paid is reduced and this increases disposable income

Discretionary fiscal policies are deliberate steps taken by the government to stimulate the economy in order to cause the economy to move to full employment and price stability more quickly than it might otherwise.

Discretionary fiscal policies can either be expansionary or contractionary

Expansionary fiscal policy is when the government increases the money supply in the economy either by increasing spending or cutting taxes.

Contractionary fiscal policies is when the government reduces the money supply in the economy either by reducing spending or increasing taxes